The U.S. government has acquired a 10% stake in Intel, making it the company’s largest shareholder in an unprecedented move that raises questions about the potential influence on businesses and markets.
Why it matters: This significant investment makes the federal government a key player in a major Silicon Valley company, sparking both praise and criticism from various quarters. The move is seen as a proactive role in a thriving sector rather than a reactive one in a failing industry, marking a shift in strategy.
The details:
- On August 22, it was announced that the federal government had acquired a 10% stake in Intel, purchasing 433.3 million shares at $20.47 per share, totaling approximately $11.1 billion.
- The government’s interest in Intel dates back to the COVID-19 pandemic when the supply chain for critical components, such as computer chips, faced significant disruptions.
- President Joe Biden signed the CHIPS and Science Act into law in 2022, which set aside $53 billion in incentives for domestic manufacturing, research, and development, including $39 billion in subsidies for building new facilities.
- The Trump administration decided to cement this strategy by acquiring a substantial equity position in Intel, ensuring it gets a return on its investment in the form of equity.
Experts have voiced differing opinions on the potential effects of this partnership.
What they’re saying:
- “The government’s investment helps dig Intel out of that catch-22 and is vital for national and economic security,” said Sujai Shivakumar, a senior fellow at the Center for Strategic and International Studies.
- “There’s precedent for that concern, and we could see a scenario where the government’s involvement distorts market competition,” said Tad DeHaven from the Cato Institute, raising concerns about the long-term implications of such a stake, including the potential politicization of private industry.
- “Markets hate uncertainty, and there are a lot of unanswered questions about the viability and impact of this arrangement,” notes Peter Harrell of the Carnegie Endowment for International Peace.
The other side: Critics argue that this move marks the end of the President’s claims of being a free-market capitalist, with some claiming that the free market is being replaced by a form of state capitalism or even communism.
What’s next: The specifics of the Intel deal, particularly regarding long-term plans and the conditions attached to the equity position, remain sparse. The broader implications for market competition and corporate governance will unfold over time as this story continues to develop.
